Economy

58 cents out of every R1 in tax revenue goes to public service salaries – DA

The Democratic Alliance (DA) has expressed concern at the runaway public wage bill, saying it leaves precious little revenue for investments into the productive sectors of the economy.

In a statement on Friday, the DA said 58 cents out of every R1 in tax revenue pays for public service salaries. Citing Finance Minister Tito Mboweni’s supplementary budget tabled on Wednesday, the party added that a further 22 cents goes towards debt servicing.

“With salaries and debt devouring 80 percent of all tax revenue, only 20 cents out of every R1 paid in taxes is now available to pay for everything from social grants to education, healthcare and infrastructure development,” DA MP Leon Schreiber said.

Labour Court battle

The government is seeking to renegotiate a 2018 Collective Bargaining Agreement that granted above-inflation wage increases to public servants until 2021.

Public sector unions have taken the government to the Labour Court after it failed to honour the Agreement on 1 April.

“[Public Service and Administration] Minister Senzo Mchunu is negotiating with our partners in the labour movement to find a balanced solution that sets compensation at an appropriate, affordable and fair level. We wish him well,” Mboweni said in his budget speech.

Schreiber warned that should the unions win their legal challenge, “the wage bill will increase to an astronomical R675.2 billion this year – which means that the state will spend 61 cents out of every R1 collected in taxes to pay wages.”

‘66% wage increase in 10 years’

In his Medium Term Budget Policy Statement (MTBPS) in October last year, Mboweni said, “29,000 public servants, plus members of the national executive, members of Parliament, members of provincial executives, and so forth, each earned more than R1 million last year.”

This is double the number of public servants earning the same amount in 2006/07, he said. Taking into account inflation, the average government wage has increased by 66 percent in just 10 years.

The wage bill will becomes even more pronounced this year because, according to Mboweni, the government will miss its tax revenue target by R300 billion.

“Gross tax revenue collected during the first two months of 2020/21 was R142 billion, compared to our initial forecast for the same period of R177.3 billion. Put another way – we are already R35.3 billion behind on our  2020/21 target,” Mboweni said.

He added that the economy is set to contract by 7.2 percent this year, the worst contraction in 90 years. Debt will also grow to nearly R4 trillion, “or 81.8 percent of GDP by the end of this fiscal year.”

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